Establishing your own business can be incredibly liberating. But it also comes with considerable risk. Whether you’ve visited bank after bank with cap in hand for a startup loan or slowly developed your side hustle to the point where you’re able to quit your day job and dedicate your time to running your business, you no longer have the luxury of a predictable and regular income stream like you did when you were a salaried worker. As such, your business is contingent upon your ability to manage your its finances while also ensuring that your household finances don’t impinge too heavily on your business profits. In order to navigate those treacherous early years of trading where so many fail, it behoves you to find ways to manage your enterprise’s spending.
This does not, however, mean being a penny pincher. Under investment in your business can be every bit as toxic and crippling as over spending. The trick is identifying where and how much to spend for optimal returns on your investment. Here are some tips that will help you to keep your spending under control without constricting your productivity or profitability…
Calculate every investment’s fiscal multiplier
Your fiscal multiplier is the amount that you can expect the investment to make for your business in direct proportion to how much you spent on it. Let’s say you buy an item of stock for $50. You know that you can sell it for $75, making a clear $25 profit or 50% of what you originally spent. Thus, your fiscal multiplier for that piece of stock is 0.5. There are many capital expenditures, however, which will offer much higher fiscal multipliers, but take longer for you to reap the rewards. Investing in new equipment or software which will aid productivity or investing in a marketing agency to grow your public profile will take a while to pay off but will do so in spades.
Be wary of hidden charges when outsourcing
If there’s one thing that no business can stand it’s unnecessary expenditure. Unfortunately, this has a habit of creeping up on businesses when they outsource. Some third party service providers provide reasonable quotes which are then inflated by additional extras which weren’t included on the initial invoice. Whether you’re outsourcing marketing operations, HR solutions or IT Management Solutions, ensure that they offer flat rate fees. Knowing what you’re paying for is one of the simplest ways to stay in control of your spending.
Scale for growth
Although some may be happy to stay small and agile, many small business owners have growth on their mind from day one. However, in order to ensure that you don’t trip over your own feet it behoves you to scale your growth. This will prevent you from maxing out on overheads or growing at a rate that will constrict your cash flow. Switching your data storage solutions to a cloud based platform is a good example of how to do this. Most cloud based solutions will allow you to scale up your use as your business grows without unnecessary spending on solutions that you’re not using.